Groupe Danone SA (BN) Has a 46% Upside Potential: Mondelez International Inc. (MDLZ)

Third, the company is cheap. At the current price of €53.46 ($69.68) per share, Danone is worth about €32.1 ($41.84) billion on the market. It is valued at 8.86 times EV/EBITDA, which is cheap when compared to those of both Mondelez International Inc. (NASDAQ:MDLZ) and Nestle. Mondelez International Inc. (NASDAQ:MDLZ) is trading around $28 per share, with a total market cap of nearly $51 billion. The market is valuing Mondelez International Inc. (NASDAQ:MDLZ) at 12 times EV/EBITDA.

Nestle is the biggest company, with a total market cap of around $226 billion. At the current trading price of around $70 per share, Nestle is valued at 12.92 times EV/EBITDA. In terms of profitability, Nestle seems to be the most profitable among the three. Over the past twelve months, it generated 15.64% operating margin, while the operating margin of Danone was a bit lower, at 14.17%. Mondelez International Inc. (NASDAQ:MDLZ)’s operating margin was the lowest at 12.2%.

Going forward, Nelson Peltz would keep pushing for a leaner cost structure to offset the economic challenges in Europe. The company could adopt a balanced approach to driving value by balancing between sales and EPS growth. In addition, Danone could invest significantly in R&D and marketing to drive its core brand portfolio, however, it should hold back from its dilutive mergers & acquisitions.

Foolish bottom line

Indeed, Danone has a much cheaper valuation compared to both Nestle and Mondelez International Inc. (NASDAQ:MDLZ). With the similar valuation of 12 times EV multiple, Danone should be worth €43.47 ($56.66) billion, or €72.40 ($94.37) per share.

The article This French Food Giant Has a 46% Upside Potential originally appeared on Fool.com and is written by Anh HOANG.

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